21. Read and understand the acceptable behaviour theory and answer the question below.

Of the three main sources of rules that regulate the behaviour of businesses, the minimum level of acceptable behaviour is set by which source?

i. Ethics ii. Society iii. The law iv. Non-legal rules and regulations 22. Read and understand the ethical theory on Non Compliance with Laws & Regulations and answer the question below.

Mary is a graduate accountant working for a division of a large biscuit making company. Mary reports to Harris who is the director of that division. Harris reports to James who is the CFO (Chief Financial Officer). Mary has recently been made aware that certain large amounts of money have been flowing into and out of the main bank account which she suspects may be linked to money laundering. She has been told by Harris to not worry about these amounts as they offset each other every day and net out to zero with no effect on the financial statements.

Which of the following is correct when applying the NOCLAR regime?

i. Mary does not need to respond as the noncompliance with laws and regulations has not been proven

ii. Mary is aware of anti money laundering laws but states that as she is not a senior member in the organization it is not her role to take the matter further

iii. Mary should alert Harris about the suspected noncompliance as she knows she must report to her immediate superior

iv. Mary should alert James about the suspected noncompliance as she knows she must report to the next level above her immediate superior

23. Read and understand the ethical theory and answer the question below.

Compared with an accountant employed in business or by government, an accountant in public practice is uniquely concerned with:

i. Professional behaviour ii. Independence iii. Objectivity iv. Integrity

24. Read and understand the ethical dilemma theory and answer the question below.

Which of the following is the least suitable to consult with when dealing with a major ethical dilemma?

i. CPA Australia ii. A close colleague iii. Your immediate manager iv. The internal auditors of your organization 25. Read and understand the ethical theory and answer the question below.

The senior partner of your firm and the chairperson of a major client often play tennis together.

What is the threat to fundamental principles?

i. Advocacy ii. Familiarity iii. Objectivity iv. Self-interest

26. Read and understand the ethical theory and answer the question below.

The senior partner of your firm and the chairperson of a major client often play golf together.

Which is the most appropriate safeguard for the firm?

i. Resign from all relationships with the client ii. Report the senior partner to CPA Australia iii. Ensure that the pair do not play golf together again iv. Ensure the senior partner has no involvement with the annual audit 27. Read and understand the ethical theory and answer the question below.

Which, if any, of the following statements are either appropriate or correct in relation to matters affecting accountants and the ethical responses of accountants?

I.

II. An accountant working in a retail business was asked to assess her organisation's written statements on expected business ethics. She stated that the statements as written were not acceptable for the business as they did not meet the high standards to which she was herself subject in the form of APES110.

III. An accountant in a manufacturing entity expressed their view that some poor actions by senior management could damage the ethical culture of the organisation even though the written code of ethics encouraged all staff to behave appropriately.

IV. CPAs in applying the APES110 framework to assist in making complex judgments are required to utilise APES110 primarily as a heuristic decision tool in order to ensure that reliable and predictable outcomes can be reached in all situations.

i. I and II ii. I and III iii. II and IV iv. III and IV 28. Read and understand the APES 110 considerations and answer the question below.

Petra Stern (CPA) was the owner Jacka Pty Ltd - a small to medium sized business. to Harvey that this preparation of information was very important as Jacka would potentially become insolvent if Union Bank stopped financing Jacka. Petra told Harvey that he was required to prepare the required information and explain it to the Bank at a meeting. Harvey agreed to do instructed because he wished to keep his job although he was not sure whether he should push through.

Which one of A, B, C or D best describes APES 110 considerations, including apparent Threats and Fundamental Principles that arise from these brief facts?

i. Advocacy, Self-interest, Integrity, Objectivity, Professional Competence, and Due Care

ii. Self-interest, Self-review, Integrity, Objectivity, Independence

iii. Advocacy, Self-interest, Independence; Integrity, Professional Competence and Due Care

iv. Confidentiality, Objectivity, Self-review, Professional Behaviour

29. Read and understand the APES 110 considerations and answer the question below.

Which of the following statements/relationships is most likely to be correct in relation to APES 110?

i. The fundamental principles of Objectivity, Self-interest and Independence are critical in relation to understanding the Code of Ethics

ii. Public Interest requires accountants in practice to refuse engagements were threats to Independence are involved

iii. Confidentiality requirements mean that improper conduct may not always be disclosed

iv. The threats of intimidation and self-review will arise where financial results are incorrectly stated 30. Read and understand the APES 110 considerations on judgement based and answer the question below.

PKYG International Accounting Group is a large accounting firm that has many audit clients and many audit teams. Which one of the following situations regarding PKYG audit teams (and team members) would create the fewest judgment-based concerns relating to 'Independence' as seen within Part 4 of APES110?

i. Roger is a member of the PKYG audit team which is undertaking the audit of Travel Ltd. Travel Ltd is a company whose business is organising travel for individual and business travel clients. Roger worked for Travel Ltd several years ago and at that time a home loan mortgage for $700,000 (loan by Travel to Roger) was arranged. At the time of the audit less than $10,000 was still owed by Roger to Travel Ltd

ii. PKYG has normal commercial travel accounts with three different travels operators. The contractual terms are highly similar in each case. One of these travel operators is Travel Ltd. Almost one third of PKYG's travel budget is spent with Travel Ltd

iii. Susan is a member of the PKYG audit team which is undertaking the audit of Shop Ltd. Susan's family members hold a large shareholding (about 10% of all shares issued) in Shop Ltd

iv. Nula Parker-King is the Managing Partner of PKYG. Nula is married to Stephen King who is the CEO of Travel Ltd. Nula and Stephen have recently separated and consider themselves no longer tied to each other in any way. They are not communicating with each other at all as divorce proceedings are under way 31. Read and understand the APES 110 considerations and answer the question below.

Matilda Price CPA was conducting a training session for her junior staff. Matilda made four statements about APES 110 and asked her staff to identify the likelihood of each statement being correct or incorrect.

Which of Matilda's following four statements would most likely be NOT correct in relation to APES 110?

i. The APES 110 Code of Ethics refers to two types of conflicts: i. Conflicts between two or more clients, and ii. conflicts between the member and the client

ii. An intimidation threat would occur when a CPA is warned by their line manager not to alert senior management about a misstatement in the financial report

iii. Rule-based codes require adherence to a set of specific rules in terms of the specific actions that should or should not be taken. APES 110 provides a valuable rules-based code for accountants

iv. Generally, the duty of confidentiality is relieved only when disclosure is required by law, or there is a professional duty or right to disclose 32. Read and understand the APES 110 considerations and answer the question below.

The management of Bendigo Ltd likes to think that Bendigo is regarded by its many stakeholders, including its employees, as being a good company with strong ethical values. Bendigo has in existence a carefully written and widely available "Bendigo Code of Conduct". In a recent management training session, the following observations were made.

Which of the following is the most likely to be NOT appropriate?

i. The CEO of Bendigo told her senior management team that in her opinion "the way in which we allocate rewards and status, especially to our junior staff, is relatively unimportant. Far more importantly, it is the manner in which we treat our customers that has the most important impact on the ethical culture affecting our organisation"

ii. The CEO of Bendigo further stated "... and this ethical culture is important. This is because the everyday employees of Bendigo Ltd are likely to be happier working at Bendigo Ltd and are likely to work harder if they perceive the ongoing existence of good ethical values"

iii. The Chair of the Board of Bendigo also addressed the senior management team and said "... the Board considers that the existence of our strong written code of ethical conduct, applying to all employees, will be more trusted by our staff if all of you senior managers within Bendigo consistently make ethical decisions

iv. The Chair of the Board of Bendigo concluded by stating ... "remember that our employees are less likely to behave ethically themselves if they believe that Bendigo Ltd merely pretends to have an ethical culture"

Module 3 Corporate Governance

33. Read and understand the Corporate Governance performance and answer the question below.

Which term is used to refer to arrangements that seek to ensure that the actions of the board of directors and executive management are performed in the best interests of the company and its shareholders?

i. Utilitarianism ii. Stakeholder theory iii. Corporate governance iv. Corporate social responsibility 34. Read and understand the Corporate Governance performance and answer the question below.

Which of the following is the most correct statement regarding corporate governance according to the CPA Australia segment 'Ethics and Governance'?

i. Boards of Directors do not participate in setting strategies and strategic direction

ii. The Board of Directors of a not-for-profit organization will be engaged in ensuring daily activities are directed to the key stakeholder goal of achieving a financial surplus

iii. Conformance' is the most important aspect of corporate governance

iv. The Board of Directors will not maintain detailed ongoing knowledge of operational events to ensure that rule compliance is achieved

35. Read and understand the Corporate Governance performance and answer the question below.

Which of the following statements is most correct in describing features of agency according to Jensen and Meckling's agency theory?

i. A highly bonded agent will require high levels of remuneration as bonding costs will be high

ii. Monitoring costs will be lower where agents demonstrate low bonding and where principals are physically remote

iii. Information asymmetry means that principals usually will have greater knowledge than agents and this explains why agents are considered to engage in self-seeking behaviour

iv. Principals are likely to be harmed where low bonding costs and low monitoring costs exist within an agency relationship 36. Read and understand the Corporate Governance on Organization for Economic Co- Operation and Development (OECD) and answer the question below

According to the OECD the likely roles of the Board of Directors of a corporation would NOT include which one of the following?

i. Aligning remuneration of key executives and board members with the longer term interests of the company

ii. Overseeing the process of communications and disclosure including to shareholders

iii. Constructing and then managing the implementation of corporate strategy and policy

iv. Replacing under performing key executives so as to ensure the ongoing success of the corporation

37. Read and understand the Corporate Governance performance and answer the question below.

The ASX Corporate Governance Principles and Recommendation (ASXPR) and the UK Corporate Governance Code (UKCGC) contain a series of requirements (also called recommendations) in relation to corporate governance arrangements for listed entities.

Which of the following statements are correct?

I. In Australia the Board of a 'top 300' corporation may utilise the 'if not why' approach to explain the non-existence of a correctly formed Audit Committee.

II. The UKCGC permits the creation of a Nomination Committee which includes executives.

III. The UKCGC and ASXPR both require that only independent directors should be on the Remuneration Committee of a corporation.

IV. The ASXPR 'if not, why not' approach and the UKCGC 'comply or explain' approach mean that the 'requirements' in both documents need not always be followed by corporations and their boards.

i. I and III ii. II only iii. II and IV iv. III only 38. Read and understand the Corporate Governance performance and answer the question below.

regarding recommended corporate governance responsibilities within their not-for-profit organizations?

I. "Accountability and stewardship are not very important in our not-for-profit organization because profit is not our goal."

II. "Our Board members often must become involved as volunteers, assisting paid management in the day-to-day running of our not-for-profit's activities. We help out with this work to keep operating costs low. This creates additional risks as the responsibilities of the board and management lose clarity."

III. "The governance focus in our not-for-profit organization is on stakeholder objectives as we do not have shareholders. Sometimes we have to work hard to identify stakeholders correctly."

IV. "Our not-for-profit's Board is mostly made up of unpaid volunteer directors, many without business experience, so the paid Managing Director must take responsibility for governance within the organization."

i. I and II ii. II and III iii. II, III and IV iv. III only 39. Read and understand the legal duties performance of directors or liquidators and answer the question below.

Which one of the following statements is correct in relation to the legal duties of directors and/or liquidators?

i. A director may temporarily absent himself/herself from the board of directors when the board makes a decision that involves a conflict of interest relating to that director

ii. A nominee director who represents the interests of a major shareholder can be required by the law to make decisions in the boardroom that are against the interests of that major shareholder

iii. A director on a board can rely on competent external advisers in relation to important board matters so if the director lacks experience in relation to making board decisions, then the advisers will become responsible

iv. A director who makes a decision in good faith in the interests of a corporation will of course be making that decision for proper purposes

40. Read and understand the legal duties performance of directors or liquidators and answer the question below.

Which one of the following statements is NOT correct?

i. If a director breaches both civil and criminal duties to shareholders, it will be very important for shareholders to bring a court case that addresses both the civil and the criminal issues

ii. Directors who breach criminal provisions of Australian corporations' laws can expect to be disqualified from managing a corporation

iii. Australian competition law recognises that breaches of law that involve collusion between competitors may result in both civil and criminal legal actions

iv. Where a director is found to have breached the corporation law in a civil matter it is possible the director will have to pay a penalty to government as well as compensation